Smurfit ‘surprised’ at lack of Government support in IP battle

Box-maker Smurfit Kappa fought an unwanted bid from a US rival earlier this year

Smurfit chief executive Tony Smurfit at the Institute of Directors in Ireland annual lunch on Friday.

Smurfit Kappa chief executive Tony Smurfit has said he was “surprised” that the Government did not give the cardboard box-maker any sign of support when it was fighting an unwanted bid from a US rival earlier this year.

Speaking at the Institute of Directors in Ireland annual lunch in Dublin on Friday, Mr Smurfit said: “Of course governments have no place in takeover activity. But I was a little surprised by the fact that Smurfit Kappa and its predecessor, Jefferson Smurfit Group, have been a significant economic and social contributor over decades [and] that we had no message at all of any support from any direction.”

The chief executive reiterated that indicative stock-and-cash bid from Memphis-based International Paper, which was valued at €8.9 billion at one stage but dropped in June as Smurfit Kappa resisted a tie-up, failed to come near to reflecting the business’s value.

“By consistently delivering, year in and year out, we believe we’ve earned the right to our independence and to control our own destiny, but we also recognise the need to excel and continue to deliver each year,” Mr Smurfit said.

The paper packaging giant forecast in May that its full-year earnings before interest, tax, depreciation and amortisation (ebitda) would be “materially better” than the €1.24 billion reported in 2017, amid strong demand for cardboard boxes in a growing economy and as the cost of recycled corrugated cardboard – a key raw material – has declined.

Medium-term plan

The company also outlined a medium-term plan in February where it aims to spend €1.6 billion in the business and on acquisitions over the next four years. Mr Smurfit told the audience on Friday that the group was the beneficiary of two “mega trends”: a move by consumers towards environmentally-friendly packaging, and the “hugely exciting” space of ecommerce.

Mr Smurfit said the Smurfit Kappa board, led by chairman Liam O’Mahony, felt strongly that the proposed offer from IP significantly undervalued the business “and all of us stuck to that principle, despite tremendous pressure, given the increasingly short-term nature of markets”.

The chief executive said he was “surprised by the lack of balance of certain media commentary” on the abortive takeover process, saying: “The views of a couple of vocal shareholders who are very short-term by their very charter do not necessarily reflect . . . the views of the vast majority”.

“Businesses such as Smurfit Kappa are built brick by brick, year on year, and cultures take decades to build,” he said. “Investors should recognise this. And if the company is performing, delivering, moving in the right direction, has credibility and substance, then why would you sell out the company for pennies in front of the steamroller, to [use] the phrase of one shareholder.”